Impact of Financial Capability on Financial Stress of Small and Medium Entrepreneurs in Sri Lanka: Special Reference to the Western Province

Abstract

A significant role is played by Small and Medium Enterprises in creating employment worldwide. Nevertheless, the sector has failed to achieve the desired level of growth despite its unexpected success as a result of significant issues dealt in each individual nation. The main limiting factor for the reduction in growth of Small and Medium Entrepreneurs is the level of financial stress encountered because of financial incapability and rising commitments. Hence the question surfaces on the impact of financial capability on financial stress of Small and Medium Entrepreneurs in Sri Lanka. The present research is primarily focused on measuring financial capability based on a variety of variables ranging from financial resources, financial self-efficacy and financial management competency. Small and Medium Entrepreneurs residing in three districts of the Western Province namely Colombo, Kalutara and Gampaha were chosen to collect the primary data by a questionnaire distributed and the required number of 250 respondents for the sample study were singled out by the stratified proportional random sampling method. Subsequently the data was analyzed using the IBM SPSS- 23 and AMOS. According to the study results, Small and Medium Entrepreneurs residing in Sri Lanka possess higher levels of financial capability and lower degree of financial stress. Further, the Small and Medium Entrepreneurs in Sri Lanka demonstrated a significant level of financial management competency, financial self-efficacy and a moderate number of financial resources. In conclusion the researcher concludes that financial capability has a direct moderate level significant negative impact on financial stress. Finally, study recommends SME should develop their financial skills and capabilities to overcome the financial stress.